Seed supply is a major bottleneck of grain production for small scale farmers in developing countries despite various efforts by many actors. Seed producing and marketing cooperatives are taken as one option where farmers produce certified seed for their localities and beyond. Ten seed producers’ cooperatives located at different agro-ecologies were samples and studied in Arsi zone of Ethiopia. Eight key performance indicators were applied and determined for all cooperatives to produce quality seed of demanded varieties, infrastructure required, certificates of competence, value addition, marketability and linkage to input providers including early generation seeds. Generally, the study confirmed well organized farmers cooperatives are able to produce and supply significant amount of quality seed of demanded varieties for the country provided enabling policies are in place to support such cooperatives, access to early generation seeds of immediate releases, credit availability and applying well designed seed business model. Hence, such cooperatives should be promoted by various actors and supporters to improve sustainable seed supply of improved varieties in Ethiopia.